Monday, September 15, 2014

Liquidated damages vs penalty

Liquidated damages are applied by the customer if it suffers some damage/loss due to fault of the supplier. It operates under a no harm, no foul principle, principally it is not applied if the customer dosen't suffer any loss.
However penalty, generally seen in British civil code can be applied even if the customer had not suffered any loss due to default of supplier.
There is a very fine line between the two and it is upto the supplier to ensure there are proper and specific  implications given in LD clause, otherwise in some law systems it would be very easy to legally interpret it as a penalty.

Saturday, September 13, 2014

Force majeure clause in a contract

From supplier point of view important thing while drafting a force majeure clause is to ensure that not only the duration of force majeure event is covered, but also the events following the event are covered.
For example lightning striking a factory as a force majeure event (for some 3-4 seconds), but events following the event (like a fire) can be for a long duration (even some days). And some resultant restoration required in the machinery can take even more time.

It is important these things are kept in mind while drafting a force majeure clause in a contract.


Wednesday, September 10, 2014

FOB vs FCA

From Seller's point of view always FCA is preferred over FOB. In FOB seller has to wait for the client's ship to come for the shipment to be boarded on the ship (which is not in control of seller).
Seller becomes liable for costs even due to the activities which are not in control of seller.